India is not a passive onlooker in the unfolding global geopolitics of semiconductor production. As both one of the largest markets for electronics and a major source of technical talent, India has the advantage of being a predominant player in the global technology drive.
Realizing the economic potential and geostrategic importance of the technology over the decades to come, India has embarked on a quest to build a robust semiconductor ecosystem. Drawing lessons from the upheaval in the global semiconductor value chain during the COVID-19 pandemic, India in the post-pandemic phase is venturing into the entire ecosystem – research and development, fabless chipmaking, design, and fabrication along with equipment supply, besides incubating a talent pool – rather than just focusing on a single aspect of the industry.
Since 2021, with the unveiling of the India Semiconductor Mission (ISM) along with the provision of unprecedented subsidies and a conducive business environment to the major industrial players, the Indian semiconductor era seems to have dawned. India is likely to establish itself as a reliable supply chain hub, taking advantage of geopolitical turbulence between major powers.
The semiconductor value chain – including the design, manufacturing, and sale of final products – is a complex global network, traditionally concentrated in the United States, its allies (South Korea, the Netherlands, Japan, and Taiwan), and China. Owing to pandemic-related disruptions and subsequent rise in labor costs, most global producers decided to diversify supply chains away from China, at least in part. In addition, the geopolitical uncertainties involving the China-U.S. trade war, followed by the Biden administration’s de-risking measures, have compelled companies to seek alternative production bases or sourcing locations outside China.
Amid this relocation in the industry, India and Southeast Asian nations like Malaysia, Singapore, Thailand, Vietnam, and Indonesia have been preferred for back-end assembly and testing operations, with new promises of front-end manufacturing in the future. India’s entry into this ecosystem is not only timely but also strategically important for diversifying the global supply chain. In the technology sector, companies prioritize political stability as well as a large domestic market for greenfield expansion projects. Consequently, India’s relatively stable political environment and huge domestic demand make it an attractive destination for strategic semiconductor manufacturing.
The ISM policy framework has been instrumental in attracting companies and investments for chip assembly and fabrication. The central government’s offer of 50 percent capital support to new entrants in the fields of compound semiconductors, fabrication, assembly, outsourced semiconductor assembly and test, and photonics, coupled with additional incentives for setting up peripheral infrastructure within industrial clusters, has spurred significant global interest. Gujarat has become the first state to complement this initiative by providing an extra 25 percent capital expenditure support, further enhancing the attractiveness of India’s semiconductor policy landscape.
That said, the advisory committee responsible for screening applications, comprising industry veterans like Ajit Manocha (president of SEMI), Vinod Dham (ex-managing partner of Indo-US Venture Partners), and Prabu Raja (senior vice president at Applied Materials), has emphasized the long-term viability of projects, indicating a preference for applicants committed to sustainability beyond government subsidies.
Recent cabinet approvals have paved the way for major developments in the sector. Tata Electronics Private Limited, in partnership with Taiwan’s PowerChip Semiconductor Manufacturing Corporation (PSMC), received approval for a greenfield venture. This collaboration marks PSMC’s fourth 12-inch fabrication plant, focusing on manufacturing the 28-nanometre chips used in power management integrated circuits, display drivers, microcontrollers, and high-performance computing logic. The initial goal is to manufacture 50,000 wafers per month, with the first chips to begin coming off the production line in 2026, according to PSMC chair Frank Huang.
Huang called the project “the beginning of India’s serious acceleration in the manufacturing and chip space.” He added, “Semiconductors are an expensive business and once you have one fab, you can get two and three. That’s the future that India can look to.”
At the same time, CG Power, Renesas Electronics Corporation and Stars Microelectronics will be setting up an assembly, testing, marking, and packaging unit with a greenfield investment of 76 billion rupees ($917 million). The chips assembled – up to 15 million per day – will be used for consumer, industrial, automotive, and power applications.
In addition, Micron was the first chipmaker to establish an assembly facility in Sanand, Gujarat, for its NAND and DRAM chips. By the end of 2024 the company has promised to manufacture the first “Made in India” memory chips. Meanwhile, Samsung Semiconductors India Research has announced the expansion of its existing base in India.
These developments reflect the growing confidence in India’s semiconductor program and plans. Moreover, partnerships with Cadence and Synopsys, two major electronic design automation (EDA) toolmakers, have been established under the Design Linked Incentive scheme for fabless startups to provide access to proprietary software for Centers of Excellence and universities in India. This initiative aims to enhance the training of design engineers and bolster the talent pool in the semiconductor industry. The Indian Electronics and Semiconductor Association and Netherlands Innovation Network (home to the lithography giant ASML), have brought out a joint report titled “Indo-Dutch Semiconductor Opportunities,” exploring the possibilities of business partnerships in semiconductor manufacturing.
Besides, India is fostering a RISC-V ecosystem (an open-source instruction set architecture, or ISA, used to develop custom processors) to enable new entrants to leapfrog into the fabless chipmaker market. The focus on RISC-V addresses the cost barriers associated with proprietary ISAs and promotes innovation and competition. With the launch of the Digital India RISC-V program, two indigenously designed chips, SHAKTI and VEGA, are being rolled out by certain fabless startups. For example, InCore Semiconductors has initiated the development of the SHAKTI chip based on RISC-V Instruction Set Architecture, the open-source alternative to proprietary ARM and x86.
Keeping in mind all these initiatives and future plans, within a decade we can expect India to be a hub of the global semiconductor ecosystem. Currently, India’s semiconductor ecosystem is on an upward trajectory, bolstered by strategic government policies, international partnerships, and a focus on talent development. These concerted efforts will make India a reliable and strategic player in the global semiconductor industry.
However, it will not be smooth sailing. Challenges like cost competitiveness, lack of infrastructure, and talent shortages have held back the semiconductor industry in various parts of the world. Vietnam, for example, is currently suffering from supply chain dependence on Western chipmakers. To avoid this vicious circle of supply chain dependency, India’s indigenous market must be given a nurturing policy environment. India’s fabless chipmakers have already forged business relations with foundries of the world. Expanding the scope further will help bolster India-created design IP.
The state government of Odisha has promoted the incubation of fabless chipmakers and supply of cutting-edge EDA tools for chipmakers. The cost of developing a prototype and further R&D is also subsidized by the state government of Tamil Nadu in its semiconductor policy. Such focused efforts on steering the ecosystem through nurturing policymaking can make India the next semiconductor superpower – one that can create design IP for global equipment manufacturers in the field of personal computers, smartphones, and wearables, as well as for the high performance computing market.
Already, India’s semiconductor manufacturing sector has proven to have a strong attractive pull, thanks to a shared democratic consensus with Western countries, which hold a critical stake in the global semiconductor value chain. But manufacturing capacity should be complemented with design talent that can work in a constant feedback loop and establish a customer-supplier relationship with a focus on export-led growth along with nurturing the domestic technology market. India seems to be on the right path.
